Category Archives: Rating

Came across Fitch ratings on India in 2006http://www.rediff.com/money/2006/jan/18fitch.htm
Rating of India — BB+
Highlights (Heading of arcticle was Fitch warns India on mounting debt/GDP ratio)Despite rapid economic growth of 8.1 per cent in the first half of this fiscal, global credit rating agency Fitch has warned India’s “weak public finances” will constrain higher growth in medium term.

The international rating agency also forecast a current account deficit of 1.6 per cent of GDP for 2005-06

n a latest report, Fitch was of the view that changing household savings behaviour, coupled with rising private sector demand for investor funds, suggest that in absence of a fiscal correction higher growth in India was going to become increasingly dependent on external financing.

“We do not believe that India’s public debt dynamics are explosive. Nonetheless, the fact that the debt/GDP ratio has continued to edge up to over 85 per cent even as growth has accelerated to 7-8 per cent indicates that India is unlikely to simply outgrow its debt burden,” Rawkins said.

Iceland Rating by Fitch in same year .
The long-term foreign and local currency IDRs are affirmed at ‘AA-’ (AA minus) and ‘AAA’ respectively. The country ceiling is also affirmed at ‘AA’ and the short-term foreign currency rating at ‘F1+’.
Thus, credit growth of over 30% per annum continues unabated, the current account deficit expanded to 15% of GDP in 2005 and net external debt has climbed to well over 400% of current external receipts.

Private consumption and investment have been slow to respond to policy tightening and the current account deficit will breach 20% of GDP this year, up from 16% in 2005, driving gross external debt up to some 360% of GDP,

Fitch acknowledges that net external debt ratios are lower on account of a rapid build up of financial assets abroad, but says that at 357% of current external receipts in 2005 Iceland remains the most heavily indebted of any Fitch-rated sovereign.

Infact at the height of borrowing binge the Debt to GDP was almost 10 times . Can you believe that

Of course after the rating India has had almost 7-8% growth per year for last 6 years and Iceland got bankrupt, bailed out by IMF and countries are still suing Iceland for recovery of dues, Negative GDP growth for 3 years –all within one and half years of being rated AA by Fitch .

Of course that does not mean that Fitch has improved itself .
Even today
Iceland Rating — BB+ (
India Rating — ‘BBB-‘ (avg India GDP growth over last 10 years — 7+% with forex reserves in excess of $300 billion )

Iceland had to take a loan of $10 Billion from IMF and other countries which was almost equal to its GDP to be bailed out . Can you imagine if India had to do that ?? Who will provide almost $900 billion to India ?? or indeed a case where this might happen ??

How on earth is Fitch rating ??
This just confirms my immense hatred towards all the rating agencies
Is that a joke for god’s Sake ??

My prediction is that even after 100 countries go bankrupt which will keep on proving Fitch is wrong still they will keep on rating just like they have done above .

Anybody who invests or uses any kind of official rating by these institutions is sure to dig his own grave